China may be about to launch a digital currency, but in all likelihood, PBoC's currency will only resemble crypto on the surface. It probably won’t use blockchain technology.
Last week we reported how CBD After five years they have been working on it. However, after the analysis of over 50 patent applications that were filed by the People's Bank of China, it has become clear that the pattern of this digital currency will only appear as a cryptocurrency.
As the deputy director of the People's Bank of China Payment and Settlement Division Mu Changchun announced, this currency should depend on a two-tier split, with the People's Bank top and commercial banks below, the country's economy and population. And even though the two-tier operating system helps to avoid excessive concentration of risks, it seems that it will not be fully decentralized.
After Changchun's announcement, PBoC representatives hurried up with the process of creating the state's digital money on Aug. 2. Allegedly, the new currency will pass round trade sanctions given by the United States,
However, there is one thing.
Let’s just mention that Changchun hasn’t explained how it would be common to interact with this It is pretty unclear when exactly the central bank plans to test and roll out.
The PBoC's Digital Currency Research started with its back in the summer of 2017 guided by Yao Qian who later left the position.
With more than 50 patent applications, all or invented or co-invented by Yao, 20 of those focus on design of a digital currency wallet.
The goal is to build a wallet for storing digitized yuans. However, as per patent application, this wallet should act only as an extension of assets held in custody at a bank account. Bitcoin's – acting as a peer-to-peer transaction system where users have a private key to controlling the asset.
However, the PBoC's digital currency system may include the features of blockchain.
Even though some of the documents filed with the central bank have been exploring the idea of using distributed networks to manage transactions, Changchun added that the strategy has been quite changed over the years.
"Since we are using digital fiat currency to replace M0, to reach retail level adoption, the first issue that we can't bypass is demand for high-volume transactions."
As an example he presented a shopping holiday and wanted to show how blockchain isn´t meant to be for mass adoption:
“Our network payments during last year’s Singles’ day sale at its peak handled 92.771 transactions per second In comparison, bitcoin and ethereum handles seven and 10 to 20 transactions per second, respectively. [Facebook’s] Libra, based on its recently released white papers, is 1,000 transactions per second. For a country as big as China, it's impossible to achieve high scalability by purely relying on blockchain. As such, we have decided to remain technologically neutral and do not necessarily rely on one fixed technological path. "
Changchun ended with a conclusion that even though crypto assets have the natural feature of decentralization, the PBoCs Currency, under the two tier system, has to stand by a centralized management model.